Thomas Creek Lumber & Log Co. v. United States

37 Cont. Cas. Fed. 76,035, 22 Cl. Ct. 559, 1991 U.S. Claims LEXIS 49, 1991 WL 19072
CourtUnited States Court of Claims
DecidedFebruary 15, 1991
DocketNo. 90-4037C
StatusPublished
Cited by2 cases

This text of 37 Cont. Cas. Fed. 76,035 (Thomas Creek Lumber & Log Co. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Thomas Creek Lumber & Log Co. v. United States, 37 Cont. Cas. Fed. 76,035, 22 Cl. Ct. 559, 1991 U.S. Claims LEXIS 49, 1991 WL 19072 (cc 1991).

Opinion

OPINION

MEROW, Judge.

This preaward contract claim matter comes before the court upon a dispositive motion filed by defendant and after a hearing on the merits. At issue is plaintiff’s request for equitable relief from a decision by the contracting officer that, as a result of a failure to supply requested financial information, plaintiff lacked the responsibility required to be awarded a timber sale contract on which it was the high bidder.

Facts

In August 1990, Region 6 of the United States Forest Service, a part of the Department of Agriculture, advertised for bids for a timber sale contract, listed as the “Sheep SSF Sale,” for an area located in the Mt. Hood National Forest, Oregon. Of the three contracting officers having responsibility for contracts in the Region, Sandra E. Marquis, who was also a Resource Specialist, assumed responsibility for the Sheep SSF sale award after the assigned contracting officer, Richard C. Blashill, became unavailable. The senior contracting officer, Thomas L. Ortman, also retained supervisory authority with respect to this matter.

On October 2,1990 the bids on the Sheep SSF Sale were publicly opened and, at the ensuing oral auction, Thomas Creek Lumber and Log Company bid the highest price. The total value of Thomas Creek’s bid was $858,670.

During 1990 the Forest Service became concerned about the condition of the timber industry and contracting officers were notified to maintain a careful watch with respect to timber purchasers to ascertain if they were financially overextended. The Forest Service wanted to avoid any repeat of a situation which had occurred several years previously where financial problems related to timber contracts had required legislative relief for the timber industry. In addition, during the first half of 1990 timber sales had been substantially restricted in the Mt. Hood area because of procedures designed to protect the Northern Spotted Owl. As a result of this restriction, timber inventories at the mills [561]*561were depleted, with resulting price impact, and timber sales, when finally authorized, were concentrated in the final quarter of the fiscal year.

After bid opening on October 2, 1990, by letter dated October 11, 1990 plaintiff was notified that it was the apparent high bidder on the Sheep SSF timber sale. In addition, the contracting officer’s letter notified plaintiff that “I will not make a decision about awarding the sale until I have determined your financial ability to perform the contract.”

As the contracting officer then assuming responsibility for the Sheep SSF timber sale, Sandra E. Marquis proceeded with the steps she considered appropriate to reach the responsibility determination required for an award of the contract. The applicable regulation, 36 C.F.R. § 223.101, provides (in part):

(a) A Contracting Officer shall not award a timber sale contract unless that officer makes an affirmative determination of purchaser responsibility. In the absence of information clearly indicating that the prospective purchaser is responsible, the Contracting Officer shall conclude that the prospective purchaser does not qualify as a responsible purchaser.
(b) To determine a purchaser to be responsible, a Contracting Officer must find that:
(1) The purchaser has adequate financial resources to perform the contract or the ability to obtain them;
******
(c) If the prospective purchaser is a small business concern and the Contracting Office determines that the purchaser does not qualify as a responsible purchaser on an otherwise acceptable bid, the Contracting Officer shall refer the matter to the Small Business Administration which will decide whether or not to issue a Certificate of Competency.

The contracting officer reviewed the history of Thomas Creek’s timber purchases, by fiscal year, from the inception of the company after 1983 through 1990. Thomas Creek’s timber contracts were charted to determine the volume of timber remaining to be harvested at the end of each fiscal year and, using a weighted average for timber value, a dollar value on the timber remaining was obtained. The information developed showed the following total volume and dollar value of remaining timber under contracts at the end of each fiscal year as follows:

Fiscal Year Volume Remaining Value Remaining
84 7,900.75 mbf $ 864,605.03
85 8,150.97 mbf 1,027,879.83
86 5,814.99 mbf 876,533.61
87 4,184.77 mbf 672,560.08
88 3,521.30 mbf 599,293.17
89 1,254.86 mbf 209,173.29
90 15,250.32 mbf 5,981,588.13

The contracting officer also reviewed quarterly profitability reports compiled by the Timber Data Company. These reports, which are utilized throughout the timber industry, indicated to the contracting officer that the profitability of Thomas Creek’s remaining timber contract volume was questionable. The contracting officer was aware that Thomas Creek had a good performance record on its prior timber contracts. Plaintiff had no defaults, had made its payments on time, and its bonding was in excess of requirements. However, given the substantial increase in timber remaining under contract with a resulting increase in sums which must be committed to down payments required by the contracts, the contracting officer considered that she had insufficient information on hand to make an affirmative determination of [562]*562Thomas Creek’s responsibility as required for an award of the Sheep SSF contract.

The Forest Service maintains a Handbook setting forth policy to guide contracting officers. With respect to timber sales, the Forest Service Handbook provides guidance on financial analysis techniques. The policy set forth in the Handbook provides that financial ability be evaluated for first time high bidders, bidders who have filed for bankruptcy, or bidders involved in unresolved defaults. The policy provided that a bidder not be subjected to a financial ability analysis more than once in a 12-month period, “unless a substantial change has occurred in the bidder’s financial position, bidding patterns have changed, or previous information submitted is proven to be erroneous.” Among factors set forth as indicating a possible need for a financial ability analysis, the Handbook listed the following:

1. History of Late Timber Sale Contract Payments.
2. Impacts of Portfolio. Bidder holds a portfolio of timber sales (including the sale presently under consideration for award) bid so high as to indicate probable losses on harvest, or has a portfolio of timber sales with skewed bids.
3. Difficulty Obtaining Bonding.
4. Increase in Total Volume. When a bid would create a substantial increase in purchaser’s total volume under contract compared with purchaser’s historical level.
5. Reorganization or Divestiture of Assets. In the timber industry, it is a frequent practice to establish affiliate corporations which are under common control.

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Bluebook (online)
37 Cont. Cas. Fed. 76,035, 22 Cl. Ct. 559, 1991 U.S. Claims LEXIS 49, 1991 WL 19072, Counsel Stack Legal Research, https://law.counselstack.com/opinion/thomas-creek-lumber-log-co-v-united-states-cc-1991.